Arbitration Provisions Must Include Clear and Unambiguous Waiver of Claimant’s Right to Sue in Court, New Jersey Supreme Court and Appellate Division Courts Hold

New Jersey employers with mandatory arbitration provisions seeking to compel the arbitration of employment disputes with their employees would be well-served to reexamine such provisions in light of recent decisions by New Jersey appellate courts.

In September 2014, in Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), a consumer fraud case, the New Jersey Supreme Court refused to enforce a mandatory arbitration provision that contained language stating that any dispute must be submitted to final and binding arbitration, because it contained no express waiver of the right to sue “in court” and did not explicitly state that arbitration was the “exclusive remedy.” The Supreme Court stressed that “[w]hatever words compose an arbitration agreement, they must be clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law.” Thereafter, the Appellate Division applied Atalese to an employment case, Kelly v. Beverage Works NY Inc., 2014 WL 6675261 (App. Div., Nov. 26, 2014). The court held that neither the arbitration provision in the collective bargaining agreement (CBA) nor in the employee handbook put the plaintiff on notice that he was waiving his right to pursue his claims in court, and therefore were unenforceable. The court found unpersuasive the employer’s argument that Atalese was distinguishable because it involved a consumer service agreement rather than a CBA, “discern[ing] no reason to conclude that employees bound by a CBA should be charged with greater understanding of their rights than the average consumer.”

In consideration of these recent decisions, employers should ensure that any arbitration provisions upon which they intend to rely include, at the very least, clear and unambiguous language that: (1) any and all disputes relating to the employee’s employment or the termination of the employee’s employment will be decided by final and binding arbitration; (2) arbitration is the sole and exclusive means of resolving such disputes; (3) the employee is waiving his or her right to pursue his or her claims in court; and (4) the employee is waiving his or her right to a trial by jury.

Employers that include arbitration agreements in their company handbooks should also be cognizant of the District of New Jersey’s decision in Raymours Furniture Company, Inc. v. Rossi, which was discussed in our March 2014 issue.